Getting Access to Myanmar, via Singapore

A man uses a mobile phone as he stands on a footbridge next to an advertisement for the JAS Myanmar Android mobile phone in downtown Yangon, Myanmar, on Tuesday, June 4, 2013.

Bloomberg News

With high-profile investors like Jim Rogers and George Soros showing a keen interest in Myanmar, it may be time for risk seekers to gain exposure.

While Myanmar continues to face headwinds on multiple fronts, the World Bank said in a report in January that the resource-rich country “is already seeing increased trade and investment from the wider international community,” after decades of international isolation. This is reflected in the World Bank’s 2012-2013 Myanmar GDP growth forecast of 6.3%, which compares with 5.5% growth for the 2011-2012 period.

Among changes expected to support growth in Myanmar, brokerage DBS Vickers highlights revised foreign investment laws aimed at enticing foreign investors, employment provisions within the foreign investment laws to ensure that Myanmar workers are not left behind, and developments in the country’s infrastructure.

With Myanmar set to reintegrate into the world the question remains: how can smaller investors invest in Myanmar given that direct access is limited?

The best way, DBS Vickers says in a note, is to “invest through foreign companies already in or expanding into Myanmar.”

Opportunities are abundant, it says, but pure plays are scarce. It tips Singapore-listed Yoma Strategic Holdings is the closest thing to a pure play. “With close to 100% of its land bank in Yangon, Yoma is a direct proxy to Myanmar’s booming real estate sector and is well positioned to benefit from Yangon’s severe demand/supply mismatch for quality residential, office, hotel/serviced apartment properties.”

DBS Vickers notes Singapore-listed Interra Resources is the largest onshore oil producer in Myanmar with a 40% market share. It tips a “significant production ramp up to drive near-term growth,” and expects “potential further upside from exploration assets and bids for new licenses.”

Competition in the energy space will be tough amid keen foreign interest. Myanmar’s Ministry of Energy recently short listed more than fifty foreign companies as potential bidders for thirty oil and gas blocks. Asia-based bidders include Indian Oil Corp and GAIL (India) Ltd.

DBS Vickers notes that Singapore-based construction company Yongnam Holdings is currently bidding for two airport projects in Myanmar – the expansion of Yangon International Airport and the development of new Hanthawaddy International Airport. “(A) tender win could net S$10.4 million to FY14F earnings and S$0.12/share to valuation,” it says.

However, not everyone is overly optimistic about opportunities in Myanmar. While Deutsche Bank acknowledges the country’s investment potential, the house is “agnostic” on SingTel 's bid for a telco license in Myanmar. Deutsche Bank expects the telcos to face significant challenges seeding devices in Myanmar, where GDP per capita ranks 205th in the world, and where an estimated 30% of the population lives below the poverty line. Additionally, “there still appears to be significant regulatory uncertainties and major reforms are required to remove barriers to take-up,” it says.

With only two telecom licenses up for grabs competition looks tough. Other companies in the running include Norway’s Telenor, India’s Bharti Airtel and Japan’s KDDI.